Chapter 4 # 11

The solutions say to multiply by a portion of the year but that is unnecessary because of the way the question is worded. The question gives revenues and expenses for the REMAINDER of the year, therefore multiplying by the portion of the year is redundant.

Recommended problems for Chapter 4

20 - 26

Note: solutions for # 25 are wrong. Investment income accrued for 1/1 - 10/1/2011 should be:
Sub NI 120 - amort 14 = 106 x 9/12months x 70% ownership = 55.65
Dividends accrued should be: 40 x 9/12 x 70% = 21
Investment account balance at 10/1/2011 should then be: 1119.65
Because control is not lost, a credit to APIC would be 31.05.

Chapter 4 # 28

There is a problem with this problem and the solutions do not address. I have determined that the best way to deal with this is to change up the problem. It should read:

On July 1, 2009, Kaplan acquired 80% of Reckers for $1,304,000 in fair value consideration.

(Remove everything regarding contingent consideration and leave everything else the same.)

The journal entries will be the same then except for A, which will be:
DR: Trademark 150
DR: Goodwill 30
CR: Investment 144
CR: NCI 36

A couple good articles

M&A in 2009

M&A Hotspots in 2010

Solutions error in Chapter 2

This refers to the Chapter 2 MC questions from the text, pages 73-74.

MC #3, the correct answer is B

MC #6, the correct answer is A

Ch. 5 #18 part c

The solution does not include amortization in the calculation. The correct answer for part c is calculated as follows:

NCI Income:
Sub NI 110
- Amort - 5
105
x NCI % x .2
21

Ch. 4, #21 part g

Apparently there is a discrepancy with the solutions manual for part g:

FV based on share prices 2250
Collective FV of identifiable Net Assets 2900
Difference is Bargain Purchase of 650

Also correct, from a student: I come up with a gain on bargain purchase of $650. The text solution shows a $50 gain. Following is my approach:

Soriano fair value at acquisition (given) 2,250
BV acquired 1,290
XS 960
Alloc: Buildings & Equipment (1,000 - 1,250) (250)
Trademark (900 - 700) 200
Patented Technology (2,000 - 940) 1,060
Unpatented Technology*** 600
Gain on bargain purchase (650) ***
Recognized at acquisition.

The solution appears to exclude this from the computation of gain on baragin purchase, resulting in a gain of only $50.

Should Unpatented Technology not factor into Gain on Bargain Purchase or is there another reason for the difference in my answer? The Unpatented Technology does factor into your answer.